Series 24 Exam Best Practices

For more than 20 years the Securities Institute has been helping people pass the series 24 exam. In this article we are going to provide you with a comprehensive understanding of how the series 24 exam is designed to test your knowledge. We will also provide you with feedback from test-takers who have detailed their experience on the series 24 exam. 

The series 24 exam is extremely comprehensive

The series 24 exam is not only one of the most challenging exams administered by FINRA, it is also one of the most comprehensive. The series 24 exam tests a wide variety of knowledge. The exam requires you to have mastered the concepts down to the smallest detail. Very subtle test points often challenge students who cannot apply these important details effectively on the exam..

A general securities principal is empowered to supervise a substantial operation

With only a few exceptions, passing the series 24 exam allows a principal to supervise virtually all aspects of a member firm’s business . A series 24 principal is empowered to oversee everything from retail operations including account opening, and retail communications to trading and market making to Investment banking and syndicate operations. As a result, passing the series 24 exam will allow you to occupy numerous positions in your career without having to take another examination.  A series 24 registered principal may not act in the capacity of a registered options principal / ROP nor that of a financial operations principal / FINOP. To operate in either of these capacities one must pass the series 4 or series 27 exam respectively. 

The role of a principal at your firm is vastly different from how FINRA sees the role of a principal

When sitting to take the series 24 exam it is important to put things in perspective. There is a dramatic difference between how your firm likely sees your role as a principal and how FINRA sees your role. The fact is, the series 24 license allows an individual to be the final decision maker at a FINRA member broker-dealer. The reality however, is substantially different. acquiring a series 24 license in many cases only allows individuals at the firm to supervise a small group of representatives or a department at the broker-dealer. For example, many individuals will be managing a branch office or an office of supervisory jurisdiction at the firm and will continue to refer many matters to a larger compliance department at the broker-dealer. In this instance the decisions will be made on behalf of the broker-dealer by officials in the compliance department and not by a series 24 registered principal at the branch, OSJ or department level.

The psychology of the series 24 exam and the mindset of the test taker

Now that we have helped you to understand the difference between the role of a series 24 principal at a broker-dealer and how FINRA sees the potential role of a principal at a broker-dealer, we need to help you understand how to take exam. Many test-takers find themselves getting into trouble on the exam when they answer questions based on how business is conducted at their broker-dealer. Many times this will lead to a wrong answer on the exam. Virtually all broker-dealers have rules and regulations spelled out in their policy and procedures manual that go above and beyond the minimum rules required by FINRA and the SEC.  For example, most broker-dealers want customers to deposit money into their brokerage account prior to executing an order Or at the very latest, they want the customer to deposit the funds by settlement date. If there was a question on the exam regarding when a customer must pay for a trade or when the broker-dealer would sell out a customer for failure to pay, All of these answers would be based on regulation T of the Securities Exchange Act of 1934. Regulation T states that the customer has 2 business days after settlement date to pay for the trade or T + 4 in most instances. Another great example of this difference, has to do with the use of the firm error account.  Most broker-dealers would never allow a registered representative to move a trade to the error account. That is how things work in the real world. However, the rules state that a registered representative may move a transaction to the error account if the broker-dealer allows it, the registered representative documents all of the reasons for moving the transaction to the error account and the error account is closely supervised by a principal. Many large and medium size broker-dealers have large compliance departments who ultimately make the decisions regarding issues at the broker-dealer. For the exam, these departments do not exist and you as the principal are the ultimate decision-maker. The buck stops with you and it is your job to determine the best course of action for the benefit of the customer and the firm. 

Series 24 feedback from real test takers

For more than 20 years we’ve been training people to pass the series 24 exam. We have helped tens of thousands of students pass the series 24.  This experience provides us with unique insight and feedback on the topics being tested and how the questions are presented. While the contents of FINRA examinations are proprietary and confidential, students do provide invaluable feedback regarding what they have seen on the test.  When we receive very detailed and specific feedback from a student or we hear the same feedback from multiple students, we carefully craft questions to mirror the feedback we receive. Here are several examples of what we have heard being tested on the series 24 exam.

A registered representative who lives aboard his yacht hears of an opening at  another marina. The registered representative rents the slip and changes marinas. Which of the following choices are correct?

A. The registered representative must first notify the firm prior to the move

B. The registered representative must notify the firm within 10 days of the move

C. The registered representative must notify within 30 days of the move

D. The registered representative must receive written notification from his / her employer prior to the move

C. The correct choice is that the registered representative must notify FINRA within 30 days of the move. This is nothing more than a registered representative changing their address. The registered representative will notify FINRA of the move by updating or amending their current form U4.

A registered representative attends a baseball game where a fight breaks out. The registered representative and 12 other individuals are charged with felony assault.  Two days later the charges are reduced to a misdemeanor of disturbing the peace and a registered representative pays a $150 fine. Which of the following choices is correct?

A. The registered representative need not take any action as the charge of a misdemeanor and paying of a fine do not require disclosure

B. The registered representative must immediately notify FINRA based on the scenario as detailed above

C. The registered representative must notify FINRA within 30 days based on the scenario has detailed above

D. The registered representative must notify the principal and the principal  may determine the proper action to take with regard to notification

B. The individual in the scenario above has been charged with a felony. As a result the representative must immediately notify FINRA of the charge. The fact that the charge was reduced to a misdemeanor is not relevant to the required disclosure.  The charge is what requires immediate notification. 

There are four or five variations of the following question. Each having to do with an elderly client, the answer keys vary as do the correct answers. Here is one such example

A long-established and elderly client speaks to his representative twice a month. Often the client is forgetful and does not recall the previous conversation with the representative. Each time the representative speaks to the client, the client says that his investment objectives have changed and that he wants to place a substantial amount of money into mid-cap stock funds. Doing so would be a substantial departure from the current asset allocation in the customer’s account. If the customer does not have a trusted contact listed on the account, which of the following actions should be taken?

A. As the principal you should advise the registered representative to refuse the order

B. As the principal you should advise the registered representative to contact the daughter of the customer who is also a client

C. As the principal you should advise the registered representative to ask the client if they would like to come to a meeting and if they would like to invite the daughter to attend

D. As the principal you should advise the representative to refuse the order, to cancel all open orders and freeze the account

C. Of the choices listed above the best answer would be to advise the representative to ask the client if they would like to come to a meeting and to ask them if they would like to have their daughter attend as well. In this scenario if the client invites the daughter to the meeting the client is allowing information to be shared with their daughter who is a third party. The representative may not simply call the daughter to discuss the customer’s account as they are not listed as a trusted contact.  

This is just one version of this particular question and as we stated, the scenarios change and the answer keys vary.  We have addressed all permutations of the question in our test banks and training guides and video classes..

The best way to prepare for the series 24 exam 

The series 24 exam is an extremely challenging test and should not be taken lightly. Many industry veterans approach this test with the attitude that I have been in the business for 20 plus years and I’m sure that I can use my experience to answer the questions correctly. As we have detailed above, your industry experience and the way business is conducted in the real world can cause an individual to answer the question incorrectly. One must master the rules and regulations as they are written and in order to do so, one must dedicate themselves to a comprehensive study program. A professional-quality textbook, a comprehensive test bank and a professional studio quality series 24 video class can guide you through the entire process. Reading the series 24 textbook followed by watching the corresponding video lecture and taking practice tests based on that information is one of the best ways to progress through the material. As you master each subject move on to the next topic.  The information regarding trading and market making, investment banking and general supervision will require you to spend a substantial amount of your study time focusing on this material. As you take your practice quizzes, refer to your notes, the video lectures and the highlighted areas of your textbook to firm up any areas where you’ve had challenges and answered questions incorrectly.

Once you have progressed through all of the material begin to take randomized simulated final exams.  Review your results, refer back to the videos and highlighted areas of your text to improve your understanding of the information.  Continue taking simulated final exams and complete your exam preparation with your GreenLight exam.

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 Good luck on your exam!

 The Securities Institute of America